Energy

Hanergy to gamble $15b on solar power niche

By Liu Yiyu (China Daily)
Updated: 2011-06-23 10:42

CHENGDU - For any company, pouring 100 billion yuan ($15.47 billion) into a fledging industry could be risky, according to Li Hejun, president of Hanergy Holding Group Ltd, a private Chinese power generator that is betting on a niche technology in solar cells.

Hanergy, which started as a hydropower generator, claimed to own the world's largest thin-film photovoltaic (PV) production capacity after it opened a 300 megawatt (mW) factory in Sichuan province, which will increase its annual production capacity to 2 gigawatts (gW) in 2012.

Thin-film solar cells, with only 20 percent market share globally, are a less efficient photovoltaic technology than the widely used silicon wafers, according to China Investment Consulting of Shenzhen.

Hanergy signed the deal with the local government in 2009 after the price of silicon peaked. Suntech Power Holdings Co, the world's largest solar panel maker, abandoned thin-film technology last year because of higher costs and uncertain prospects after it opened a production line in 2007, when the silicon price hit a record high.

Hanergy, one of the few privately owned power generators in China, aspires to more than being just a PV maker. The company said it has signed agreements to develop 4 gW of solar power projects in various regions, including Europe.

The company plans to invest more than 100 billion yuan in its solar business within 10 years.

The investment plan put the previously unknown company, which has a hydropower track record, in the headlines, partly because the size of the investment beyond their means according to some analysts and also because of the niche technology it chose.

Funding will come from profits from hydropower generation and bank loans, according to Li.

According to the company statement, Hanergy has 6 gW of hydropower capacity in its portfolio.

Hanergy said it received 10 billion yuan in loans from the Agricultural Bank of China Ltd in 2003.

Li is not alone in his optimism about the solar industry. Government officials and industry experts think it has a rosy future before it.

"Solar power will be a dominant energy source by 2050, contributing to at least 50 percent of energy consumption by then," according to Liang Zhipeng, deputy director general of the department of renewable and new energy of the National Energy Administration

Meanwhile, the government intends to double the solar power capacity target to 10 gW in the next five years, spurring an investment binge. The current capacity is 1 gW.

Despite the strong determination of the government and companies, not all is sunny in the solar industry.

"We have been in a very tough situation," said Song Aizhen, a senior official at CECEP Solar Energy Technology Co, a State-owned company.

Companies are operating with the narrowest of profits. According to the Song, CECEP, which has projects totaling 110 mW in China, has only a 5 percent profit margin. Some companies are operating at loss, she said.

The lack of fixed tariffs or supportive tax policies on land, tax and financing are pushing up the cost of solar energy.